It's the Fed. It literally prints money and loans it out. And it's doing this to replace money erased during a bank run, so no inflation implications.

if the FED prints monney, it creates inflation. If it does not, it does not save SVB depositors.

Inflation occurs when more money is being used to buy things.

The SVB depositors are going to turn around and put their money in a new bank.

Printing money and loaning it out is literally monetary inflation.

Money isn’t erased during a bank run. It’s given back to the owners who always had a right to have it. Fractional reserve banking is what erases money.

where is there any indication that money is being printed for this? if anything trillions have been printed to support the so-called "peasants" (hate that term) that kick-started the avalanche.

Read the parent comment: it states printing money is not inflation. The author either is being disingenuous or doesn’t understand how inflation works.

Printing money is not the same thing as inflation. It could cause inflation, but doesn't have to. And other things can cause inflation too. Inflation is merely the fact that stuff gets more expensive, but that can have many different causes. Excessive money printing is certainly the most notorious cause, but not all money printing is excessive. Sometimes printing money is the prudent thing to do because there's a growing need and therefore demand for money.

The definition of monetary inflation is increasing the monetary supply. That doesn’t need to happen by starting a printing press. It could be someone typing a bunch of zeros on a keyboard somewhere to create new money out of nothing.

I never said inflation was detrimental or harmful (my personal belief is that it is harmful, however), just that adding money to the supply is by definition monetary inflation (the origin of the concept of cost inflation which is what we’re being asked to accept as the true definition). Putting air into a balloon doesn’t mean it will pop; it’s still being inflated. Hey, it’s even more fun for a while ;-)

I was responding to a parent who said printing money isn’t inflation, when it’s the literal definition of, and the origin of the term in monetary theory. It’s not very constructive to conversation to attempt to change meaning of words to make one point or another.

I am sorry and you are correct. I blindly assumed that "inflation" means "price inflation", but you explicitly specified "monetary inflation", which is something completely different (though sometimes related).

My apologies for reading incorrectly. My comment is true only for price inflation.

No one cares about monetary inflation if it doesn't cause price inflation.

M3 is usually the money measure we care about for the real economy and price inflation, not M1.

M3 is erased during a bank run, because the multiplier from M1 to M3 caused by fractional reserves goes away.

It wasn't erased, it's in peoples pockets in the form of cash, a la "bank run."

Only the small percentage that was available in the bank's reserves; the money of all the people who didn't get their money out in time was indeed erased.

I believe that would be the FDIC, which is funded by banks (its deposit insurance), right?

I believe the Fed is opening a new program to allow for "systemic risk" loans at typical Govt. interest rates; so there aren't any worries about running out of cash to give to customers having a panic

SVB has a ton of bonds that mature (will be cashable) after ten years, but nobody wants to pay for them today because they can make more money placing their cash in a savings account. For a silly analogy, imagine if you had a bunch of cash locked up in a CD, but also had a surprise medical bill. Our parents could very easily look at your books and say “huh, I can advance you 80% of your CD because there is really no chance the CD won’t pay me back once it matures.” Is this a bailout? I don’t think so. It’s different than paying off our drunk uncle’s gambling debts for the 7th time.

And also we probably don’t want to say “haha silly SVB customers, they can wait ten years to get their money back” because none of us want to live in a world where most Americans, most of whom don’t understand all these complexities, start runs on ALL the banks because they think this is the start of a collapse. It becomes self-fulfilling at that point.

Your analogy is not only silly but naïve. SVB is way closer to your drunk uncle saving in 30yo whiskeys pricy bottles than child savings.

Treasury bonds are wild and irresponsible investments now?

Man, it's probably time to jump ship from the US economy all together.

Treasury bonds are not irresponsible. What is irresponsible is to not hedge your interest rate risk in the form of interest rate swaps. Most other conventional banks do exactly that; they have a portfolio of held-to-maturity (HTM) securities that they hedge with interest rate swaps to avoid bearing that risk. In the financial sector, you only leave unhedged the investments you are _actually_ betting on; if you are to say that they were betting on 10y bonds (until maturity) holding the same value as the day they bought them, without any form of risk management, I would consider that irresponsible.

Its not as clear as treasuries are safe or not. The price function is clearly dependent on term.

long term treasuries are extremely risky assets, by definition and move a lot on interest rates. whereas short term treasuries like less than three momths barely move on fed rates, hence much safer.

Svb bank made the wrong choice of holding super long duration treasuries. They knew what they were getting into, and did it anyway for higher yield at that time. they could have put the money in 3 month expirations and wouldnt have been in this situation.

If you're a bank that can't differentiate/navigate long term vs short term debts while experiencing ballooning deposits, then yes I agree it's time to jump ship and find a new profession.

I don't see how the US economy is to blame for the actions of a greedy monoculture based on "tech line go up". They made a long term bet on bonds with historically low interest rates, doubling down that the party would continue indefinitely. They didn't have a chief risk officer for 9 months! How is that the US economy's fault?

There's a reason they lobbied congress to weaken risk regulations.

I'm hoping people go to jail over this.

I didn't ask about SVB.

In terms of real dollars, those bonds will be worth less in 10 years because of inflation.

You’re correct in highlighting that if they fronted the cash now the bonds would be less, but it is simultaneously true that they will be worth less “2023 dollars” in 10 years.

We are currently working with 2023 dollars.